1. Calculate the duration gap for a financial institution with duration of total assets of 3.50, duration gap of total liabilities of 1.2. Given the financial institutions total assets are $100 billion while total liabilities are $90 billion.
2. Suppose you deposit $300,000 in a local FDIC insured commercial bank. Unfortunately, the bank becomes insolvent and file bankruptcy. Explain how the FDIC can resolve the insolvency when bank fails and what is the impact on your deposit when FDIC takes different approaches.
3. One of the specific goals for central bankers is financial system stability. Considering the U.S., for example, would this imply that the Federal Reserve would always take action to prevent any single bank from failing? Explain